Invoice financing gives way to arrange funds by either mortgaging or selling to pay the bills of your invoices. Though there are some advantages and disadvantages about invoice financing which can help your business’s end on a short term goal.
Here are some of the pros of invoice financing:-
- Invoice financing gives a boost in liquid cash for smooth operations. The working capital security is achieved which fulfils the daily expenses of the company. Your business property and assets remain untouched. It gives a higher period of short term liquidity of cash.
- You can apply for business loan from the lenders as they calculate the amount given in your invoices rather than undergoing complete evaluation of your business earnings. Such loans are disbursed in 24 to 48 hours after you apply for it. Hence again it proves that your working capital will not be a hold-up.
- The chances of the default payment and late payment are considerably lowered since it’s the lender’s responsibility to take care of your finances and collecting the payments from the clients as well as the customers.
The cons of invoice financing which you need to be aware of are:-
- The new business start-ups cannot opt for such proposals because in the longer tenure invoice financing can become expensive if left unpaid.
- Under invoice financing, you are at risk of exposing your financial credentials to the customers as the payment collection is done by the lenders.
- When you plan to mortgage or sell you give the idea that you do not trust your customers to pay on time. This might affect your working relations with your clients.
This idea of financing should only be used if liquid cash is urgent and absolutely necessary.